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25 November 2022

Fixed Income Report November 25, 2022

Global Market Update
• Wall Street was closed yesterday commemorating a thanksgiving day. However market was poised by FOMC minutes of meeting.
• Majority of Fed’s officials judged that slowing the pace of rate hikes would likely soon be appropriate. Market participants expect Fed’s peak rate would be at 5.00-5.25% and US central bank is projected to pivot in 2H23.
• BoK raised its base rate by 25 bps to 3.25% during Nov-22 meeting, in-line with consensus estimate. Now Korea’s reference rate stood at the highest level since Jun-12.
• On the other hand, Korea also reported a slower than expected increase in PPI. The PPI rose 0.5% MoM/7.3% YoY in Oct-22, this was lower than the previous month pace of an increase 7.9% YoY.
 
Domestic Market Update
• The benchmark 10-year Indo GB yield (FR0091) was flat at 6.95% on Thursday (11/24/22).
• Risk perception slightly improved and IDR appreciated against USD yesterday.
• Indonesia’s 5-year CDS stood at 99.9 bps yesterday (vs 108 bps on the previous day).
• The IDR strengthened against USD and was closed at IDR15,665/USD yesterday (vs IDR15,687/USD on the previous day).
• Loan interest rate increased 12 bps MoM to 9.09% while the 12-month term deposit rate increased +32 bps MoM to 3.84% as of Oct-22.
• The increase in interest rates in the banking sector reflects the ongoing transmission of monetary policy.
• After recording a 9-month of surplus, government budget finally posted a deficit of IDR169.5tn in Oct-22 (-0.91% GDP).
 
Market Projection
• Given the recent development on global and domestic market, we expect the 10 year Indo GB yield to move within a range of 6.85-7.05% for today.
• Attractive Indo GB series to be traded today : FR0084, FR0037, FR0047, FR0091, FR0096.
 
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